Company Takes Preventive Measures After Violation

A major Japanese corporation has taken steps to strengthen its internal compliance system following a recent violation, aiming to prevent future compliance failures.

Background

In 2018, the US Department of Justice launched an investigation into Kobe Steel, a leading Japanese steelmaker, after it was discovered that the company had falsified and fabricated inspection data for its products. The scandal led to widespread criticism and regulatory action.

Causes of Non-Compliance

An internal report by Kobe Steel identified management style as a key factor in the misconduct, citing an overemphasis on profitability and inadequate corporate governance. This highlights the importance of effective compliance programs and robust internal controls in preventing future violations.

Recent Cases

• Kobe Steel Case: The company’s falsification of inspection data led to widespread criticism and regulatory action.
• Nissan Case: Former CEO Carlos Ghosn was removed from his position after allegations of misconduct, including misstatements in security reports and unauthorized personal use of company assets.

Government Obligations

Ethical Guidelines

Public officials are subject to ethical guidelines that prohibit certain conduct and require reporting obligations. State-owned enterprises are also subject to special acts that prohibit bribing of their officials and employees.

Compliance Management

Private companies are expected to maintain effective compliance programs to prevent misconduct by their officers and employees, even in the absence of specific compliance management obligations for the government or state-owned enterprises under Japanese law.

Digital Transformation

• Guidelines and Principles: Regulators have issued guidelines and principles to ensure fair use, transparency, and accountability in emerging technologies such as artificial intelligence, blockchain, and digital platforms.
• Japan Fair Trade Commission Guidelines: The commission published the Fundamental Principles for Rule Making to Address the Rise of Platform Businesses in 2018, emphasizing ensuring transparency and fair competition in digital platform transactions.

Updates and Trends

Plea Bargaining System

The introduction of a plea bargaining system in June 2018 has allowed companies to provide information about criminal acts committed by their officers and employees in exchange for avoiding prosecution or obtaining lighter sentences. This move is seen as a significant step towards promoting corporate cooperation in detecting and preventing misconduct.

Key Developments

• Corporate Cooperation: The use of the plea bargaining system to avoid prosecution after its officers and employees were convicted of bribing a foreign public official highlights the importance of companies taking responsibility for their actions.
• Emerging Trends: Japan’s compliance landscape continues to evolve in response to emerging trends and technologies. Companies must stay ahead of the curve by implementing robust internal controls and effective compliance programs to prevent future violations and maintain public trust.

Overall, Japan’s compliance landscape requires continued vigilance and attention to emerging trends and technologies. Companies must prioritize transparency, accountability, and effective compliance programs to prevent future non-compliance issues and maintain public trust.